Contents
In Short
- After years of development of Hydra by IOHK, it was finally released on the mainnet.
- Hydra offers increased scalability, which means that DApps can process thousands of TPS.
- Meanwhile, whales and institutional investors show signs of accumulating ADA tokens.
Hydra Launched on Cardano. The Hydra is a mythological multi-headed being. In the Cardano ecosystem, the protocol’s name will allow dApps to process thousands of transactions per second in parallel. In other words, several networks will process transactions autonomously on a sidechain. Thus, it is one of the most awaited innovations in Cardano. The protocol offers excellent scaling to the network through a private Blockchain. The developers of this project have been working on it for several years, and now it is a reality.
Hydra deployed on the Cardano network
This launch marks a significant milestone for the ecosystem, as it will increase its scalability and transaction speed. It is undoubtedly a significant development for Cardano, as it takes the technology from the research phase to the production phase. Moreover, with it, projects are expected to be able to carry out thousands of transactions per second and, shortly, millions of transactions per second. For now, IOHK will look to work with various stakeholders and partners to expand the implementation of the protocol. The collaboration includes teaming with exchanges, wallets, and other blockchain platforms to integrate Hydra into their systems.
“Our goal is to enable Cardano to grow and increase its adoption by making it more scalable. We do this by creating various protocols to make these situations possible”.
Sebastian Nagel, Hydra Lead Software Engineer
What is a Layer 2 solution?
A layer 2 scalability solution is a method to scale a system or network beyond its initial capacity. It typically involves adding more resources, such as servers or storage devices, to handle increased traffic or usage. This solution is often used in cloud computing environments, where resource demand can fluctuate significantly over time. By implementing a layer 2 scalability solution, businesses can avoid downtime or performance issues caused by insufficient resources.
In the blockchain world, a blockchain layer 2 solution is a technology that allows for faster and more efficient transactions on a blockchain network. It creates a second layer on top of the main Blockchain, allowing for quicker processing times and reducing the workload on the main network. This can be particularly useful for applications that require high transaction volumes, such as decentralized finance (DeFi) platforms or online marketplaces. Using a layer 2 solution, users can enjoy faster transaction speeds without sacrificing the security and immutability of the underlying blockchain network.
Ethereum, Bitcoin, and Layer 2 solutions
Ethereum also has a layer 2 solution. It’s called the Ethereum Layer 2 Scaling Solution or ELS. This solution enables faster and cheaper transactions for Ethereum users, making the platform more accessible. With ELS, Ethereum can handle more transactions and increase its scalability, which is crucial for the platform’s growth and success. If you’re an Ethereum user, you can rest assured that there is a layer 2 solution available to make your experience even better.
Bitcoin also has its own layer 2 solution. The Lightning Network is a scaling solution that facilitates faster and cheaper transactions on the Bitcoin blockchain. It operates through a network of payment channels allowing users to make off-chain transactions without waiting for confirmations on the main Blockchain. This enables near-instant transactions with significantly lower fees than traditional on-chain Bitcoin transactions. The Lightning Network is seen as a promising solution to Bitcoin’s scalability issues and has gained significant adoption since its launch in 2018.
What is Hydra, and why is it important?
Hydra is the layer two scaling solution that IOHK, the R&D arm of Cardano, developed. Its authors want it to improve the scalability of Cardano’s blockchain network while maintaining its security and decentralization. Hydra has its roots in stateful channel technology, which enables fast and secure off-chain transactions.
The mechanism behind this development enables the creation of “Hydra heads,” essentially parallel processing channels that can handle thousands of transactions per second. Cardano can now process significantly more transactions than before, making it more scalable and suitable for mass adoption. This protocol is also a significant development, as it addresses one of the main challenges facing blockchain networks: scalability.
As we said, with the implementation of Hydra, Cardano will be able to process more transactions per second, making it more scalable and suitable for mass adoption. In addition, developers designed the application to maintain the security and decentralization of the Cardano network. Decentralization is an essential aspect because as blockchain networks become more scalable, there is a risk that they become more centralized, which goes against the fundamental principles of Blockchain. Decentralization, scalability, and security are the pillars of a blockchain. All three form the “Scalability Trilemma“:
Whales accumulate ADA
Although Hydra’s launch has not significantly impacted the price of ADA, large investors are showing signs of accumulating tokens. In a previous post, we reported that whales and institutional investors are the authors of large transactions averaging $100,000 made recently, totaling around $10 billion. The reason for this activity needs to be clarified.
#Cardano whales are on a shopping spree! Over the past 2 weeks, they've scooped up 560 million $ADA tokens, valued at $218.4 million. 👀🙀 pic.twitter.com/6uaRZMbfOO
— Ali (@ali_charts) April 9, 2023
The data also shows that “large holders” control 36% of the total ADA supply. They act as a “proxy” for the activities of institutional players and large investors. These numbers indicate how they may invest and position themselves. It is worth noting that ADA is still down around 88% from its 2021 highs.
Despite this, the Cardano ecosystem is showing promising signs, with Blockchain being one of the most developed and used. Santiment reports that the Cardano blockchain processed 2.2 billion transactions. This number shows an active network in development and usage, which delivers quality and trust.